Crucible: How a CEO’s Injury Helped Him Revitalize His Young Firm

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In the spring of 2009 Farbood Nivi and the venture capitalists backing Grockit, his online-education start-up, were locked in a vigorous debate. More than two years after its launch, Grockit had just 15 employees, mostly engineers—and Nivi still served as CEO. “Farb wanted to keep the management team very small,” says Mitch Lasky, of Benchmark Capital, an early investor. “The venture guys were arguing for more-aggressive hiring—a layer of VPs and senior managers. I always tell entrepreneurs, ‘Try to build enough competence into the layer below you that if you got hit by a car, life would go on.’”

On May 7 of that year Nivi unfortunately had an opportunity to live out that hypothetical. He was riding home on his Vespa scooter from a night at the movies with colleagues when, near the corner of 8th and Mission Streets, in San Francisco’s South of Market neighborhood, he was hit by a minivan. The initial diagnosis in the ER was a broken rib, bruises, and lacerations, but a CAT scan showed that Nivi’s right kidney was severely damaged. Doctors performed emergency surgery to remove half the kidney and repair the remainder—a process that left Nivi with a 10-inch scar and his company with a leader who was effectively out of commission for months.

Emergency surgery left Nivi with a 10-inch scar and his company effectively without a leader.

It’s an unpleasant reality that executive illness is a risk factor for every business. Even at large companies—including Apple, where Steve Jobs has faced serious illness since 2004, and McDonald’s, which had two consecutive CEOs die suddenly in 2004 and 2005—worries about a leadership vacuum or unclear succession lines can rattle investors and employees. For a start-up, however, the uncertainty created when a company founder is incapacitated can be profound. At the smallest companies the business plan may exist mostly in the founder’s head; often there’s no succession plan at all.

Grockit was able to survive, thanks to some proactive employees and a leader who did his best to stay engaged during his recovery. In fact, Nivi says, the experience has in some ways made him a better manager. Although everyone involved acknowledges that the scooter accident was a serious setback in the young company’s life, it provided a valuable lesson about how to carry on when a CEO is temporarily sidelined.

Nivi, who is 34, graduated from the University of Michigan with a degree in psychology before embarking on a decade-long career in teacher training and curriculum development at Princeton Review and Kaplan. While working for those established education companies, he began to conceive a better way to provide tutoring—one less reliant on a teacher to disseminate knowledge. He envisioned a model with more peer-to-peer instruction, an idea that led to the creation of Grockit’s core product, a social game that teaches students math, English, and other subjects. By the time of the accident, Nivi and his team of product-focused engineers had developed a strong beta version of the software, but the firm had little revenue and the product launch was progressing slowly—the company hadn’t even hired a marketing team.

David Marino, a close friend and Grockit’s director of operations, visited Nivi in the hospital and found him covered with cuts, receiving powerful painkillers through an IV, and taking deep breaths. “He was in survival mode,” Marino says. That hospitalization lasted a week; Nivi had a laptop with him but checked in at the office only intermittently. Once at home, however, he turned his bed into a command center equipped with two laptops, an iPhone, and a BlackBerry. His message to employees was “I’m available, contact me—whatever you need.” Observers commend Nivi for keeping the team focused despite his absence. “He continued to essentially run the company from his bed in an unbelievable way,” says Lasky, the venture capitalist. He returned to the office in late June, but he still wasn’t himself. In mid-August his doctors discovered he had adhesions, a postsurgical condition that can lead to serious intestinal obstructions. He entered the hospital for a second surgery and a two-week stay.

Not everything went smoothly during his absence. “Some people took advantage of the situation, not showing up until much later in the day,” says Marino, who assumed control of the office. “People started missing Fridays. The environment definitely changed. The mood changed. We’d lost our leader.” Three of Grockit’s 15 employees quit in the months after the accident. Nivi cites the work of the late Russell Ackoff, a Wharton professor emeritus who wrote about leadership as an aesthetic function. “A leader is a cheerleader for a vision,” he says, “and people need to be cheered into the worldview we’re trying to get them into.” When the leader is absent, that cheering stops, and problems mount.

By the time Nivi returned to work full-time, in December, his outlook had changed. “We spent a lot of time reflecting on what the accident taught him about himself,” says Jeff Fagnan, a partner at Atlas Venture and a close friend. Before the accident Nivi had obsessed over Grockit’s burn rate, trying to minimize payroll to make the venture capital funds he’d received last longer. After the accident he concluded that was the wrong approach. “One of the things that came out is that he needed help in growing this business,” Fagnan says. Nivi concluded that by hiring managers who were better than he was at certain functions, Grockit would improve its chances of success. As he recovered, Atlas Venture decided to invest $4 million in the company, bringing the total capital raised to $17 million; this enabled Nivi to hire a chief marketing officer and a chief business development and strategy officer. In September 2010 Roy Gilbert, a veteran Google manager, came aboard as CEO. Today the business has 20 employees, and Nivi says both revenues and users are increasing each month. He now serves as president and chief product officer.

Nivi believes that the accident changed his outlook in another key way: He feels far more decisive. “I’m quicker to move on things,” he says, “whether it’s a bold new initiative or removing some situation in the company that’s not working out—to not let anything that needs to change go unchanged.”

Health problems for the CEO aren’t typically a risk that concerns the stakeholders of a new company. “Most of the time, we’re investing in a young founder who’s full of life, full of energy, taking on the world,” Fagnan says. Grockit managed to come through the unexpected crisis and may even have gained strength in the process—by drawing the remaining members of the original team closer, forcing Nivi to accelerate hiring, and giving him a better perspective and focus.

“My understanding of the priorities of the organization has been made crystal clear,” Nivi says. That wisdom was hard-won, as signified by the long scar on his torso.

A version of this article appeared in the March 2011 issue of Harvard Business Review.